Consumers are opting for cashless, online payments, making it vital for businesses to explore merchant services, regardless of the types of products or services they sell. E-commerce merchants or those who are planning to start an online store should be familiar with and clearly understand merchant accounts, payment gateways, and many more.
Read on to know more about merchant accounts, their types, the eligibility criteria to get this type of account, and so on.
Introduction To Merchant Accounts
Wondering what a merchant account is? In simple words, it is a different kind of business bank account that is essential for companies to receive and process credit card payments, debit card payments, and other electronic transactions. It works as a link between the credit account of the consumers and the checking account of the company.
When a payment is made, the money will be instantly credited to the merchant account of the company, from where the funds can be transferred to the checking account of the business. In other words, they can be considered different kinds of commercial bank accounts. For online stores or businesses, having merchant accounts is vital.
What Are Different Types Of Merchant Accounts
Given that different types of businesses have unique needs in the case of transactions, there are various kinds of merchant accounts. As a result, companies can choose the one that best fits their requirements.
1. Retail
This kind of merchant account is primarily designed for retail companies that have a fixed, brick-and-mortar establishment. The benefits of these accounts include fewer transaction fees and limited setup.
2. Mobile
They are primarily designed for businesses that are often on the move without a fixed physical location. For instance, food trucks, book trucks, and any other business that is run with no stable location can acquire mobile merchant accounts. These businesses can easily accept online payments by obtaining mobile credit card processing equipment.
3. E-commerce
The e-commerce merchant accounts are the best choice for businesses that sell their goods and services online. These types of accounts are quite different from the accounts that are designed for brick-and-mortar businesses. There are different categories, including:
- Direct
- Offshore
- Local
- High-risk
- Third-party
Eligibility Criteria For Obtaining A Merchant Account
Thinking about obtaining a merchant account for your e-commerce store? Then, it is best to check whether your business meets the eligibility requirements or not. If you need a CBD merchant account, you can get help here.
The primary requirement to get a merchant account is there should be a registered business. Generally, it is necessary to submit a few vital documents, including the name of the company, Employer Identification Number (EIN) or company tax ID, Social Security Number, and basic contact info. Sometimes, it might be mandatory to submit information about the types of products or services your company offers.
To get approval for the merchant account, the acquiring banks conduct underwriting, and for that, they are likely to perform a credit check. To check the reliability and financial stability of the business, the acquiring bank asks for additional documents like tax returns, payment records, business registration, and many more.
Different Types Of Fees Associated With Merchant Accounts
Depending on the provider, the fees associated with merchant accounts differ greatly. However, the biggest fees would be the ongoing payment processing fees which are usually levied for every payment received. Some of the common types of associated fees are listed here:
- Setup fee: It is a one-time fee that is charged when the account is first opened.
- Monthly fee: It is also known as a statement fee, which the company needs to pay every month. It is levied in order to prepare the monthly statement and offer consumer support.
- Monthly minimum fee: There are a few payment processors that set the least number of transactions or value of payments that should be achieved every month. If your business does not surpass this minimum value, you need to pay the monthly minimum fee.
- Annual fee: Some banks levy an annual fee for the account that is charged once a year.
- Batch fee: When a batch of new payments is sent for payment processing, normally, one or two times a day, the batch fee is charged. The batch fees are often 10 to 25 cents for each transaction.
- Chargeback fee: Chargeback fees are levied when consumers deny a charge and ask for a repayment. Chargebacks are simply nullifying an already processed payment and giving back the charged money to the consumer. Due to that, businesses are required to pay this chargeback fee to the bank, which is needed for covering the processing fees related to refunds.
- Early termination fee: If you discontinue your existing account prior to the agreed time duration, then an early termination fee is charged.
Things To Consider When Choosing Merchant Account Providers
At present, there are plenty of merchant account providers, so choosing the right provider is essential to ensure smooth payment processes. Here are some of the factors you need to take into account when choosing a merchant account provider:
Reliability
It is important to check whether the merchant account provider is reliable or not by checking the reviews and testimonials. Also, go through vital details of the providers such as date of establishment, physical location, online presence, and many more.
Cost and Fees
As the expenses associated with merchant accounts vary based on the provider, it is important to consider the cost and fees. Compare and choose the best provider that has fewer associated fees or fewer costs.
Integrations
Verify whether the provider offers various payment integrations or not with the account. Also, check if the transactions are easily processed without too much delay.
Support Service
It is best to choose merchant account providers that offer quick and reliable customer support all the time. If the consumer support service is bad, it is likely to affect your business negatively.
Bottom Line
If your business has a merchant account, it will give additional and much easier options for consumers to make transactions. So, in order to stay on top of the market and attract more customers, acquiring a merchant account for your company and accepting online payments are the best bets.
